II. SUMMARY JUDGMENT STANDARD
Under Fed. R. Civ. P. 56(c), a court may grant summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." The non-moving party may not simply rest on its pleadings to oppose a summary judgment motion but must affirmatively come forward with admissible evidence establishing a genuine issue of fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 324, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986).
In deciding a motion for summary judgment, the Court must construe the facts and inferences in a light most favorable to the non-moving party. Pollock v. American Telephone & Telegraph Long Lines, 794 F.2d 860, 864 (3d Cir. 1986). The role of the court is not "to weigh the evidence and determine the truth of the matter, but to determine whether there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986).
The substantive law governing the dispute will determine which facts are material, and only disputes over those facts "that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Id. at 248. Where the moving party has carried its initial burden of demonstrating the absence of a genuine issue of material fact, "its opponent must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Idus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986). A genuine issue for trial does not exist "unless the party opposing the motion can adduce evidence which, when considered in light of that party's burden of proof at trial, could be the basis for a jury finding in that party's favor." J.E. Mamiye & Sons. Inc. v. Fidelity Bank, 813 F.2d 610, 618 (3d Cir. 1987)(Becker, J., concurring).
The parties do not dispute that New Jersey law applies in this diversity action. Under New Jersey law, a settlement agreement is a contract and normal contract rules apply. Nolan v. Lee Ho, 120 N.J. 465, 577 A.2d 143 (N.J. 1990); Hannigan v. Township of Old Bridge, 288 N.J. Super. 313, 672 A.2d 257, 260 (N.J. Super. Ct. App. Div. 1996).
A. Material Breach
A breach is material if it goes to the "essence" of the contract. Ross Sys. v. Linden Dari-Delite, Inc., 35 N.J. 329, 173 A.2d 258, 264 (N.J. 1961). The Release provides a payment schedule. It also provides: "This release is conditioned upon the receipt of said payments and in the event of failure of same, [Linan-Faye] retain[s] the right to enforce payment of same" ("the enforcement provision"). The phrase "said payments" must be construed as referring to the payments listed in the payment schedule and incorporates the dates payable. Thus, the Release is conditioned, for example, on receipt of $ 450,000 on or before May 20, 1997, not on the mere receipt of $ 450,000.
Simply stating that a release is conditioned on timely payment is not the same thing as providing that a delinquent payment shall constitute a material breach allowing the releasor to void the release. There is language commonly used to communicate such an understanding. For example, if the Release provided that "this release will be void if any of the payments are not made on their scheduled dates," then plaintiff would be relieved from its obligation not to seek to collect on the judgment. Similarly, if there were another contract document here stating that "the attached release will be void if any payment is late," then plaintiff would be entitled to seek collection on the judgment. The question here, then, is whether the language the parties put in the Release has the same legal effect as these types of provisions.
Appearing just below the payment schedule, and just before the statement that the release in conditioned upon receipt of payments, is the phrase: "TIME IS OF THE ESSENCE FOR THESE DATES." "Time is of the essence" ("TOE") clauses, or provisions using different language to state clearly the same idea, are common in contract law. They tend to appear in real estate contracts and construction contracts.
Breaches of such provisions generally are material breaches which relieve the non-breaching party from its duty to perform. Koolvent Aluminum Awning Co. of N.J. v. Sperling, 16 N.J. Super. 444, 84 A.2d 762, 763 (N.J. Super. Ct. App. Div. 1951) ("It must be acknowledged that where the parties have expressly stipulated that the time for the performance of their mutual undertaking shall be an intrinsic, essential and vital term of their compact, a lack of the specified punctuality is ordinarily fatal to the contractual rights of the delinquent party."); see Neptune Res. and Dev., Inc. v. Techniques Indus. Sys., Inc., 235 N.J. Super. 522, 563 A.2d 465, 470 (N.J. Super. Ct. App. Div. 1989) ("If time was of the essence then the breach was material and plaintiff had a right to cancel."); Salvatore v. Trace, 109 N.J. Super. 83, 262 A.2d 409, 418 (N.J. Super. Ct. App. Div. 1969) ("Where time is of the essence of the contract as it is here, one seeking to enforce it either by way of specific performance or by an action for damages for breach of contract must first establish that he tendered performance at the time called for by the contract."). The question now is whether the inclusion of the TOE clause has the effect of conditioning the release of HACC upon plaintiff's timely receipt of the payments such that late payment constitutes material breach and permits plaintiff to void the release.
A court must endeavor to give effect to all terms in a contract "and the construction which gives a reasonable meaning to all its provisions will be preferred to one which leaves a portion of the writing useless or inexplicable." Prather v. American Motorists Ins. Co., 2 N.J. 496, 67 A.2d 135, 138 (N.J. 1949). To conclude that the parties did not mean to condition the Release upon the receipt of the payments by or on the exact dates specified would be to read the "TIME IS OF THE ESSENCE" out of the contract altogether and to render it utterly superfluous. This Court will not presume that the TOE provision here was engrafted thoughtlessly onto the Release. The phrase "time is of the essence" is a well-known and specialized term of art in contract law which makes manifest the parties' intent that tardy performance be treated as a material breach. As the New Jersey Superior Court, Appellate Division, has stated:
Making time of the essence is an effective, time honored tool of contract administration and enforcement. It provides certainty and objectivity in the definition of rights and obligations between contracting parties, particularly when it has been negotiated between the parties and expressly made a part of their agreement. The alternative is a date for performance which is subject to adjournment and, ultimately, to a test of reasonableness applied by a trier of fact. . . . Judicial tampering with the parties' agreement emasculates this tool and promotes litigation instead of the certainty and objectivity sought by the parties.